Unlocked — Unlocked is the term used to describe mobile phones that are not tied to a particular service provider in order to be used. Many cell phones are tied to a single cellular provider at their introduction, but are later unlocked for use on many networks.
Unlocked phones can be used on the network of any compatible provider with the insertion of a compatible SIM card.
Some phones that are locked can be unlocked using computers or special phone codes, though this can invalidate warranties.
The iPhone is SIM locked, meaning that it can only be used on AT&T and Verizon's networks in the U.S., a move that has caused substantial criticism from some users.
However, a number of third-party programmers have found ways to unlock the iPhone through both hardware and software. Few of these techniques have been widely released and the iPhone seems only to work on T-Mobile and AT&T for now.
While jailbreaking and unlocking are not the same, they're similar. Jailbreaking allows users to install whatever software they'd like on their iOS device, while unlocking allows them to choose their phone service provider. The two things are often done at the same time, but they're not the same thing.